Homework Answers
Answer: 38.0%
Calculations:
Operating leverage = % Change in operating income ÷ % Change in Sales
3.8 = % Change in operating income ÷ 10
% Change in operating income = 3.8 x 10
% Change in operating income = 38.0
Thus,
Option 1: 38.0% is correct
Option 2: 2.6% is incorrect because net operating income should be increased by 38.0%
Option 3: 10.0% is incorrect because net operating income should be increased by 38.0%
Option 4: 26.4% is incorrect because net operating income should be increased by 38.0%
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